Despite the growing traction of investment in stocks, banks seemed to be the most attractive option for Iranians in the last fiscal year (March 2019-20), according to a poll by Iran Student Polling Agency (ISPA) conducted in the middle of the year.
The poll showed investing in housing is considered the second safe investment. ISPA asked a representative sample of all citizens, including in rural and urban areas “how they prefer to manage their savings?”
According to the results published on HIBNA website, the news portal of Bank Maskan, 25% of respondents considered deposits in banks as the best way to protect their hard-earned savings while 15% preferred real estate.
Investment in gold, foreign currency and stocks were rated as the other best investment choices.
On why housing is among the top investment options for many Iranians, ISPA pointed to the pattern of surge in home prices and rents.
Data from the Ministry of Roads and Urban Development indicates a significant rise in home prices despite the apparent decline in the key decline in total deals.
Average price of one square meter of a residential unit in Tehran was 155.68 million rials ($950) in one month (March –April) of the poll year, up 8.6% month-on-month. This is while the number of home sales reached 10,242 in the capital, down 24.4% compared to the month before.
Ironically, but not surprisingly, hardly 10% of those polled preferred to use their money for manufacturing. This corroborates the vision among many Iranians that investing in production is costlier with low-returns and is plagued with layers of bureaucracy, red tape and nepotism.
As such, people are more inclined towards less arduous but and more lucrative businesses such as gold, currency, autos and housing.
Among other things, observers point to galloping inflation, high lending rates and rising prices of raw materials as the main disconcerting factors that often discourage investors to go into manufactures.
Stocks Gain Luster
Citing financial analysis, HIBNA said the poll would probably come up with a different outcome if it had been conducted in the final days of the last fiscal year when the stock market posted dramatic growth.
Given that the poll was conducted in the middle of the last Iranian fiscal year, analysts opine that investment in banks gradually lost traction as year approached to an end. The assumption is confirmed by lenders’ financial reports.
Analysts predict that a similar poll at the end of last year would show a change in the view of respondents in favor of stocks with preference to park money in banks trailing behind.
However, they insist that investment in housing would still be the second best choice.
Driven by rising liquidity from bigger numbers of new investors, Iran’s stock market saw a dramatic surge over the past year with the main index of Tehran Stock Exchange, TEDPIX, soaring more than 200% in one year.
In the meantime, banking data show people are less inclined towards long-term deposits.
According to Central Bank of Iran data, total time deposits in banks reached 2,796 trillion rials ($17.6 billion) by last December, registering 24.2% growth compared to the same period in 2018.
This is while, the volume of sight deposits increased by 56% during the same period to reach 802 trillion rials ($5 billion), indicating that long-term deposits are increasingly turning into sight deposits.
Financial experts warn that in the absence or delay on the part of the CBI to adopt contractionary policies, a bigger portion of long-term deposits could turn into sight deposits. This is raising fears that financial markets in Iran may be hit by new price shocks emanating from the liquidity tsunami.
The rise in sight deposits partly substantiates depositors’ unwillingness to keep their money in banks at 20%, which obviously is low compared to the high and rising inflation and tanking of the national currency.
